The catering company that brought the infamous Turkey Twizzler into Britain's school kitchens yesterday admitted that Jamie Oliver's campaign against sub-standard school dinners had taken a healthy bite out of its earnings, wiping £10m off sales in six months.

The celebrity chef's Channel 4 television series School Dinners has shaken the contact catering industry to the core, leaving steadily retreating revenues and a number of multimillion pound contracts that have failed to attract bidders - despite the promise of more money from the government.

The Turkey Twizzler firm Scolarest said its earnings had plunged in recent months after its parent company Compass, the world's largest caterer, launched a clampdown on low-margin contracts, many in British schools. The company refused to say how many school dinner contracts it had left entirely, but said earnings had also been hit by parents choosing to make their children packed lunches.

The government last year responded to Oliver's calls for improved standards, pledging to invest £220m over three years to help schools and local education authorities hire better-trained cooks and elevate school meal standards. It has recommended a minimum of 50p be spent on ingredients for primary school meals and 60p for dinners at secondary schools.

The Department for Education is to introduce a range of food standard improvements from the start of the next school year in September, though caterers will be given two years' grace at primary schools, and three years' at secondary schools, before these measures become compulsory.

Recent contract negotiations between caterers and local education authorities have been mired in squabbling and uncertainty over how the extra money is to be spent. In some cases, once hotly contested tenders are being shunned. No bids at all are thought to have been received for recent contract tenders in Bracknell Forest and Berkshire.

Kent county council is understood to have been forced last month to retender a £9m-a-year contract - one of the largest in the country covering 405 schools - because of a poor response from bidders. The contract starts in June and the existing operator, Initial Catering, has declined to rebid, saying changes to the contract mean it is not financially viable.

Other caterers have complained that many of the expected constraints on food standards, particularly removing sweets and chocolate from vending machines, make running a profitable business almost impossible.

Geoffrey Harrison, of Harrison Catering, told the Caterer magazine: "We support the push for healthier food but if you remove the revenue coming into a school, someone has to pick up the tab."

The French catering giant Sodexho, which runs many British school kitchens, said extra money committed by the government was taking too long to reach school caterers. It added that standards proposed by the new government-sponsored school meals review panel were too expensive, and said spending in primary schools needs to be raised to at least 70p if new standards are to be met.

The Department for Education had been expected last week to give further details about standards to be rolled out from September, but an announcement has been put on hold after Ruth Kelly was replaced as education secretary in the cabinet reshuffle. There had been suggestions that the government was preparing to raise the level of extra funding in the hope of wooing contract caterers back to the negotiating table.

Mike Bailey, Compass chief executive, said British school dinners were the greatest challenge facing the company, which provides meals around the world from the Pentagon to offshore oil rigs. The caterer was staggered by the level of parental anger sparked by Oliver's television programme, and has blamed the "Jamie effect" for a rise in the number of parents opting out of school meals altogether.

Mr Bailey said yesterday there were signs that the number of children eating school meals was picking up. "We have developed and are introducing more healthy eating concepts that meet standards, including fresh fruit and salad bars, pasta dishes, fresh "home-cooked" dishes of the day and yoghurt bars. And we are starting to see the first signs of increasing participation, though [the] government has recognised it will take time to see these changes through."

Scolarest says it is still keen to win new school contracts, and recently signed a £1m deal with Slough council in Berkshire. A spokesman said: "We still see education as an area of opportunity. Moving away from competition on costs to competing on healthier living is not bad for business." However, the company says it will continue leaving contracts where it is unhappy with profit margins. Mr Bailey said the group was about half way through this process.